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Black Dog Faces Declining Sales; Changes at Top

A giant among Vineyard businesses - in terms of people on the payroll and a profile that virtually spans the globe - the Black Dog Tavern Inc. is showing some serious chinks in its armor.

"There's no hiding it that the Black Dog has experienced some financial difficulty," said Robert Douglas Jr., the newly minted general manager whose father opened up the legendary restaurant and bakery on a January day back in 1971.

Mr. Douglas said sales were down $2 million in 2001, about 20 per cent of gross revenue. But trouble at the Black Dog goes beyond just having had a tough year economically. There's also the issue of massive turnover at the top levels of the corporation.

In the last year alone, the Black Dog has either fired or lost five of its most seasoned executives - two of whom have already taken legal action against their former employer.

Joe Hall, who was at the helm of the Black Dog for 22 years, stepped down last March, then turned around in October to file a blistering lawsuit that seeks at least a million dollars in compensation and accuses the Douglas family of unfairly siphoning off hundreds of thousands of dollars from the Black Dog enterprise.

In July, Jack Livingston, executive chef for the last 15 of his 24 years with the company, lodged a complaint with the Massachusetts Commission Against Discrimination seven months after being fired. Pink-slipped at 49, he claims age discrimination.

Neither his nor Mr. Hall's case has been settled.

To cap off an already rocky year, Mr. Douglas found himself denying rumors this week that the Black Dog was on the brink of bankruptcy. "The rumors of bankruptcy are 100 per cent inaccurate," he said. He declined comment on any pending legal action facing his company.

But there's no denying that after more than a decade of explosive growth - new outlets for meals and baked goods, more retail storefronts, the advent of mail order, cookbooks and even an attempt to turn an old dining car into cafe space - the Black Dog has entered a period of retrenchment.

Mr. Douglas's "aggressive cost-cutting" has resulted in the closing of the flagship waterfront tavern for three months this winter. In addition, last year he vacated the SBS building in Tisbury, sending the catalog call center to the catalog warehouse in the old Spinnaker Lanes bowling alley and moving the retail operation across the street to the cafe - where half the number of tables are now squeezed in with displays of T- and sweatshirts. Mr. Douglas also eliminated table service at the cafe, saying customers prefer the quicker experience of ordering at the counter.

Last spring, the Black Dog severed its relationship with Kolodny & Rentschler, the Tisbury advertising firm that designed their catalog and produced their graphics for more than 20 years, and gave the job to a mainland firm. More cuts could be on the way, threatening other businesses that rely on the Black Dog for income.

Mr. Douglas said the Black Dog will review its relationships with current vendors. "There are some hard decisions on my desk," he said, acknowledging that his company's financial predicament has already "put pressure on employees and vendors."

The company has also scrambled to raise cash, selling off $800,000 in real estate last June and then leveraging its State Road warehouse property for a $3.1 million loan the same month.

Despite all the grim steps, its chief executive was emphatic that the Black Dog empire - its tavern, two bakeries, two general stores, mail order catalogs and another cookbook in the works - is in no danger of collapsing.

A brawny 30-year-old dressed crisply in wool trousers and a pressed button-down shirt, Mr. Douglas came on the scene in October 2000, fresh from his previous career flying cargo planes in Florida. He was hoping to work alongside Mr. Hall as a manager in training, but within months found himself running the whole business. Now, he works alongside his younger brother James, 29, who took over as general manager of retail operations.

Mr. Douglas talks like a business school graduate but has only a liberal arts degree in political science. He blames almost all the economic setbacks at the Black Dog on the national recession and says the staffing turmoil is simply a result of a new business approach.

"Day one, I gave everyone the chance to come on board and change to my philosophy of how the company is going to be managed," he said. "It's business. We don't have the operation that we had two years ago.

"Unfortunately, these decisions have consequences. Some people found other jobs," he added.

The payroll is down to 64 - a low point, Mr. Douglas said, especially when compared to previous years, when the Black Dog carried more than twice that number on its year-round work force.

But not everyone agrees that the Black Dog's troubles are a symptom of the faltering national economy. Said one former employee, who asked not to be named: "Why they would be in trouble is beyond me. We were just flat-out busy."

The details of Mr. Hall's lawsuit also shed some light on the problems, painting a picture of mismanagement. According to the suit filed in Dukes County superior court, Mr. Hall claimed that the senior Mr. Douglas used Black Dog funds "to pay for personal costs and expenses" and used the Black Dog "to purchase goods and materials for his personal use [and] the personal use of his family."

The lawsuit claims that Capt. Douglas did little work for the Black Dog enterprise, while grabbing more than his share of the profits - $1.75 million over the last six years compared to Mr. Hall's $990,000 over the same period.

Besides paying out bloated salaries, the Black Dog could have gotten into trouble by growing too big, too fast. Even the younger Mr. Douglas admitted that the rapid growth of his family's business led the company "to lose control of costs and expenses."

Now, as the second generation ofDouglases takes the reins of the Black Dog, there's concern that the hard-knuckled approach will strip the business of the spirit in which it was started - as a place for Islanders to gather, especially in the harsh off-season months.

"The people here are the people I grew up with," Mr. Douglas said. "But it's also very important to protect the shareholders. My management team will be judged on its successes."